Four Habits that Promote Financial Well-being – Part Four

For many years, I thought that as long as I had a decent job, didn’t spend “too much” (whatever that means), and balanced my checkbook at the end of the month, things would turn out OK financially. I thought it didn’t really matter exactly where I spent my money or exactly how much I spent. After all, who really wants to micromanage their financial life?

But then, something unexpected happens. For me, it was a period of being out of a job. For others, maybe it’s divorce or the birth of a child. Whatever the circumstance, something shakes up the routine and what you’ve been doing just isn’t working any more. It was during that time that I realized I thought of my bank account as a “magic box.” Some amount goes into the box at payday, things happen, and when you stick your hand in to pull out money for a bill somehow there’s enough to cover what I need. I didn’t want to know the details (thank you very much), just that the magic box had enough to cover my rent, gas money, and eating out occasionally.

While it may seem like the ideal situation to just lower your cost of living or increase your income to cover everything so you don’t need to work on the details, there is a better way. The good news is, finances are not magical and you are capable of understanding them. When you believe they are, you resign responsibility to the magic rather than taking it on yourself. Until you take control of your finances, the finances and the fear of never having enough will continue reign instead.

One specific example of making this work for you is having a “Fun Fund” for the month. Once you know what your budget looks like and how much you have left over after paying bills and setting aside for savings, determine what you can afford to enjoy on a paycheck to paycheck basis. I love doing this with cash and a jar at my house. Every paycheck, put a $20 bill into the “Fun Fund”. You don’t have to belabor the “should I really spend this?” guilt or the “do we really have money to go to the movies tonight?” fear. If it’s in the fund, it’s yours to spend guilt-free. Before, when you thought money was just a magical substance, you never really knew if there were funds there to cover the splurge, so it brought guilt along for the ride. Now, you know the funds are there and you can enjoy it more…financial freedom!

This final truth is not so much a stand-alone statement as an outflow from the other three. Once the plan, the savings cushion, and the determination to live within your means are in place, you are free to use your money and truly enjoy it.